Renting current house and buying a new one

AnotherJoe

vira1369 wrote: »

Thank you, Cakeguts. We should be fine with paying two mortgages. The reason we are interested in buying another house is to avoid paying rent (which is really money down the drain) and also because I will be getting some help from my company to relocate which we want to use to invest in property. But if the numbers ultimately do not work out, then we will have no other go but to rent a house!

You would lose nine thousand pounds on SDLT !

vira1369

AnotherJoe wrote: »

You would lose nine thousand pounds on SDLT !

Correct. But as opposed to losing, say, £15000 on rent. In addition to SDLT, we would also be losing mortgage interest - but we would at least be building equity towards the house. So, the plan is to think carefully before deciding.

00ec25

vira1369 wrote: »

Correct. But as opposed to losing, say, £15000 on rent. In addition to SDLT, we would also be losing mortgage interest - but we would at least be building equity towards the house. So, the plan is to think carefully before deciding.

if you convert to sole ownership one of you will be losing (forever) their claim to CGT exemption (aka Private Residence Relief) on the current house since they will no longer be an owner of it. as you are both HR taxpayers, that means 28% CGT on whatever % of the overall ownership period is represented by the date of purchase to date of moving out. Eg if you have owned it for 6 years, let for 2, move back and then sell after another 2 years, in overly simplistic terms: 6/10ths of the gain would not be exempt from CGT. At 28% that could be a chunky number.

Don't understand your comment about having to buy with the BTL mortgage - has your current lender given you consent to let for the full 2 years you seem to want to do this for? The let property cannot remain on a residential mortgage just because it is in sole name. It wil be let, it must either be under CTL (often time limited to less than 2 years) or a BTL anyway.

I think you need to go and talk to some advisers then come back when you have established some of the basic facts that will impact your plan.

AnotherJoe

vira1369 wrote: »

Correct. But as opposed to losing, say, £15000 on rent. In addition to SDLT, we would also be losing mortgage interest - but we would at least be building equity towards the house. So, the plan is to think carefully before deciding.

I think building equity is a red herring in this case. Let's say your mortgage repayment is £500.month of which £400 is interest and £100 reducing the amount owed. Then £400 is "dead money " in the same way rent is, only the £100 counts. But you coudl equally have an interest only mortgage at £400 and "build equity" by just saving £100 in a savings or investment account and buy a house with that eventually.